Signals Suggest Improving USA Upstream
(The views and opinions expressed in this article are those of the attributed sources and do not necessarily reflect the position of Rigzone or the author.)
When asked by Rigzone for their insights on recent and emerging oil and gas market trends, a panel of prognosticators pointed to signs of strengthening in the U.S. upstream. Keep reading to learn what these positive market signals are.
Rigzone: What were some market expectations that actually occurred during the past week – and which expectations did not?
Tom McNulty, Houston-based Principal and Energy Practice leader with Valuescope, Inc.: Healthy WTI and Brent prices have caused the North American rig count to go up again – based on the Baker Hughes (NYSE: BKR) data, it was a plus-nine last week. All were oil, with two in Louisiana, seven in New Mexico, and one in South Dakota. Texas lost one. Right now, the rig count is 503, and one year ago it was at 803. Will the capacity that exists in North America comes back online, quickly, given demand from Asia? Yes, I think it will.
Phil Kangas, U.S. Partner-in-Charge, Energy Advisor, Natural Resources and Mining, Grant Thornton LLP: U.S. rig counts continue to rise, with Baker Hughes reporting last week the addition of nine new oil rigs. The Texas Freeze is in the rear-view mirror. OPEC+ is holding supply steady. Promising signals abound for upward demand trending from early vaccine roll out, increased travel activity and stimulus checks in consumers’ hands. These factors considered, additional U.S.-based upstream capital investment was not unexpected.
Rigzone: What were some market surprises?
Mark Le Dain, vice president of strategy with the oil and gas data firm Validere: The blockage of the Suez Canal was certainly a surprise, as well as the likely continuation of that blockage. Companies that understand the complexities more than myself, and have experienced refloat efforts that took weeks, are diverting ships around the Cape of Good Hope. It’s obviously bullish for oil to have the critical waterway constrained but likely not helpful for global refinery margins that were already hurting from increased transport costs.
Kangas: Markets continue to react to COVID-19 developments. Though broader crude price trends have been positive, the market for Brent and WTI reacted to the AstraZeneca (NASDAQ: AZN) vaccine side-effect concerns, case surges across Europe, and distribution delays. In recent days, major economies across Europe have widened lockdowns and restricted activity. While officials have declared the vaccine safe and inoculations have resumed across Europe, the temporary halt caused an unexpected disruption in price recovery, signaling continued volatility.
McNulty: It was not really covered that much, but China passed by the U.S. in 2020 to become the largest refiner of crude oil in the world, per the Energy Information Administration (EIA). As Europe goes back to being locked down due to the COVID virus, and as the EU continues to stagnate, Asia, broadly defined, does not seem to have any issues in recovering, growing, and rapidly returning to pre-COVID economic expansion levels.
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